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Asymmetric Effects of Uncertanity on International Trade: An Empirical Investigation Based on The NARDL Model

Author

Listed:
  • Åžekip YAZGAN
  • Cihat KARADEMÄ°R
  • ReÅŸat CEYLAN

Abstract

Uncertainty leads to postponement of investments, increased savings, reduced consumption and, consequently, reduced international trade volume and economic slowdown. It is accepted that there is an asymmetric relationship between global uncertainty and international trade. In other words, an increase in uncertainty is expected to decrease the volume of global trade, while a decrease in uncertainty is expected to increase the volume of global trade. This situation is important in terms of the need to decompose the effects of positive and negative shocks on the volume of global trade. In this context, this study aims to investigate the relationship between global uncertainty and international trade over the period 1990:Q1-2022:Q2 using the World Uncertanity Index (WUI) and Baltic Dry Index (BDI) series, respectively. In the study, the long and short-run asymmetric relationships between these series are analyzed with the Non-Linear Autoregressive Distributed Lag (NARDL) approach. The results of the study show that there is an asymmetric relationship between the two variables analyzed in the analysis period and that decreases in the World Uncertainty Index have an increasing effect on the Baltic Dry Index.

Suggested Citation

  • Åžekip YAZGAN & Cihat KARADEMÄ°R & ReÅŸat CEYLAN, 2023. "Asymmetric Effects of Uncertanity on International Trade: An Empirical Investigation Based on The NARDL Model," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 3.
    • Handle: RePEc:fis:journl:230313
    DOI: 10.25295/fsecon.1286611
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F10 - International Economics - - Trade - - - General

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